Saturday, September 15, 2007

"If this [land transfer (gift)] deal goes away, and it’s not subsidized by another mechanism, we will not build a store there," he [Cabela's store developer Tim Holland] said. "To say we’re going to come to Rapid and lose money because we all want to be there is not correct."

Actually, no. What we are saying is that you are likely to make a BUTTLOAD of money, or you wouldn't even be considering coming here at all. However, we also think (call us old-fashioned) that it's only fair that you, uh, EARN it, WITHOUT an outright gift of 30 acres of prime land from the taxpayers of Rapid City. I mean, I like shopping at Cabela's, but not THAT much. Incentives, OK. TIFs, oh, all right, if you insist. But this land gift is a little much even by South Dakota standards, ESPECIALLY when some of the principals involved in the deal -- how do I say this -- may have a personal interest in the deal.

What truly floors me is that solid Republicans like Alan Hanks, and others I know right here in ol' Robbinsdale, don't have a problem with all this government intervention in the business of.. business. Isn't this why we can't have a comprehensive nationalized health system? Because government will interfere with efficiency and good economics, so we'll eventually come to grief?

Of course, proponents of public incentives don’t just point to the workers the businesses they attract will have to hire. They argue that there is an economic “multiplier” effect, by which spending at a factory or entertainment venue indirectly generates spending on other goods and services.

Imagine a local economy of $100 million in 2000. A new business relocates to the area that year and directly spends $10 million. Economic development boosters claim that for every dollar spent another three are generated indirectly, as the relocation draws more businesses. (Manufacturers of automotive parts, for example, will establish plants or distribution facilities near a new car assembly plant.) So in 2001, the economy should be pumping along at $140 million—the original $100 million plus $10 million in direct spending plus $30 million from the multiplier effect.

“It never happens,” says Phil Porter, an economist at the University of South Florida. Porter has looked at several cities where the multiplier effect was promised and checked to see if it worked as predicted. His method is to take the current economy and work backward—in the case of our hypothetical city, subtracting both the $10 million spent by the enterprise and the $30 million allegedly generated by the multiplier effect. If the effect worked as promised, he’d arrive at $100 million. Instead, he invariably gets less.